ECN 360 Grand Canyon Final Exam
ECN 360 Grand Canyon Final Exam
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ECN 360 Grand Canyon Final Exam
ECN360
- Which of the
following represents the relationship between Disposable income (DI),
consumption (C), and saving (S)?
DI + C = S
DI = C * S
DI = C – S
DI = C + S
- Which of the
following is NOT a method for promoting global Economic growth?
Count on the world’s
governments to develop policies that promote economic growth in developing
nations.
Reliance on private
markets to direct capital goods toward their best use.
Encourage population
growth so that developing nations’ labor supply increases.
Market based approach.
- In the
classical model, an increase in aggregate demand will cause
a decrease in price level.
an increase in actual
output, or Gross Domestic Product (GDP).
an increase in price
level.
a decrease in actual
output, or Gross Domestic Product (GDP).
- Of the
relationships below, which is the least stable?
Consumption
Net exports
Investment
Saving
- When
investment occurs in developing nations
investors hope to gain
significant returns on their investment and residents gain higher rates of
economic growth.
Significant levels of pollution
usually occur.
Government politicians
usually benefit from the illegal payments made to secure the investment.
higher rates of economic
growth are usually not achieved.
- A
multinational agency that specializes solely in making loans to promote long-term
development and growth in developing countries is the
Federal Reserve System.
International Monetary
Fund.
International World Fund.
World Bank.
- The Board of
Governors of the Federal Reserve System is
composed of seven members
who are appointed by the President and approved by the Senate.
elected by the general
public.
composed of 12 members of
the Senate and the U.S. House of Representatives.
composed of
representatives from the country’s 12 largest commercial banks.
- Supply-side
inflation is caused by
an increase in aggregate
demand and no change in aggregate supply.
a decrease in aggregate
supply and no change in aggregate demand.
an increase in aggregate
supply and no change in aggregate demand.
a decrease in aggregate
demand and no change in aggregate supply.
- Keynesian
theory is based on the concept that
planned savings equal
planned investment only at full employment.
full employment is
automatically attained in any economy.
saving and consumption are
influenced primarily by real current disposable income.
saving is influenced
primarily by the interest rate.
- When the Fed
conducts open market operations, it
also raises taxes at the
same time.
shifts the demand for
money curve.
Purchases or sells
government bonds issued by the U.S. Treasury.
is engaging in fiscal
policy.
- An increase
in the money supply will
decrease aggregate demand.
increase aggregate demand.
increase aggregate supply.
decrease aggregate supply.
- According to
the quantity theory of money, an excess quantity of money supplied will
lead to
a higher price level.
a reduced level of real
Gross Domestic Product (GDP).
a reduction in spending
and higher interest rates.
a higher level of
employment.
- Adverse
selection is a barrier to financing global growth because
of the differences between
financing using loans, portfolio investment and foreign direct investment.
there is the possibility
that the funds are used for riskier behavior than the lender agreed to.
firms sometimes have
trouble determining whether they need funds or not.
if investors have trouble
identifying high-risk firms they may be unwilling to lend funds to creditworthy
firms.
- An increase
in the money supply will cause which of the following to occur?
a rightward shift of the
aggregate supply curve
a leftward shift of the
aggregate demand curve
a leftward shift of the
aggregate supply curve
a rightward shift of the
aggregate demand curve
- In the above
figure, when disposable income is greater than 600,
saving is positive.
the MPS is negative.
the MPC is greater than 1.
saving is negative.
- Which of the
following is true about the World Bank?
It is a U.N. sponsored
agency that specializes in development loans.
It is a multinational
agency that specializes in development loans.
It is a U.S. agency that
specializes in development loans.
It is made up of all
central banks in the world
- A higher
domestic price level should
- decrease net
exports.
- increase
desired investment.
- increase
real wealth and consumption.
- none of
these.
- Moral hazard
is a barrier to financing global growth because
if investors have trouble
identifying high-risk firms they may be unwilling to give money to creditworthy
firms.
firms sometimes have
trouble determining whether they need funds or not.
there is the possibility
that the funds are used for riskier behavior than the lender agreed to.
of the differences between
financing using loans, portfolio investment and foreign direct investment.
- In the
Keynesian model, whenever planned investment is greater than planned
saving,
the amount of planned
investment will decrease, and real GDP will decrease.
there will be an unplanned
inventory decrease, and GDP will eventually increase.
the amount of planned
investment will decrease, and real GDP will remain unchanged.
there will be an unplanned
inventory increase, and GDP will eventually decrease
- Country X
has experienced GDP growth of 6 percent and a population growth of 4
percent. What is this country’s growth of per capita real GDP?
10 percent
-2 percent
6 percent
2 percent
- Fractional
reserve banking can be thought of as a bank
withholding a portion of
its total deposits that are not loaned out.
holding deposits equal to
its net worth.
paying a fraction of its
profit to depositors.
loaning out all of its reserves
- Suppose that
a new customer opens a checking account and a saving account, placing
$50,000 in each. Later, the bank makes a loan of $100,000 to a business
firm. For this bank,
assets remained unchanged
but liabilities increased by $100,000 because of the loan.
assets increased by
$100,000 because the checking and saving accounts are assets, and liabilities
increased by $100,000
because the loan is a liability.
assets increased by
$100,000 because the loan is an asset, and liabilities increased by $100,000
because the checking and saving accounts are liabilities.
assets increased by
$50,000 because the saving account is an asset, while liabilities increased by
$50,000 because the checking account is a liability.
- Consider the
above figure. At a price level of 150,
inventories of unsold
goods decline.
total planned real
expenditures exceed total planned real production.
the price level would
rise.
total planned production
exceeds total planned real expenditures.
- Europe and
Asia both fall into deep economic recessions. What impact will this have
on U.S. aggregate demand?
The U.S. aggregate demand
curve will shift to the right.
U.S. aggregate demand will
remain unchanged.
None. A nation’s aggregate
demand is only affected by its own economic conditions.
U.S. aggregate demand will
decrease.
- How does the
Fed increase the level of reserves in the banking system?
by raising interest rates
by selling bonds
by buying bonds
by lowering interest rates
- Involuntary
unemployment
will increase as the wage
rate falls.
exists when there is a
shortage of labor.
exists when there is an
excess quantity of labor supplied.
occurs when the wage rate
is below the equilibrium wage rate.
- At a level
of real disposable income of $0, suppose consumption is $2,000. Given this
information, we know with certainty that saving equals
-$2,000.
-$1,000.
$0.
$2,000.
- Suppose that
when disposable income decreases by $2,000, consumption spending increases
by $1500. Given this information, we know that the marginal propensity to
consume (MPC) is
1/.25 = 4.
$1,000/$750 = 1.33.
.75.
.25.
- In the
Keynesian model, an aggregate demand shock
will cause the aggregate
demand curve to shift, leading to a change in the price level but not real GDP.
will cause the aggregate
demand curve to shift, leading to a change in the price level and real GDP.
will cause the aggregate
demand curve to shift, leading to a change in real GDP but not the price level.
will not lead to a shift
of the aggregate demand curve.
- The planned investment
function will shift downward if
the existing stock of
capital decreases.
business expectations
become more pessimistic.
the interest rate falls.
real disposable income
increases.
- Which of the
following is NOT a function of the Fed?
Regulating the money
supply
Holding reserves for
depository institutions
Lending funds to
credit-worthy private firms
Supervising member banks
- Refer to the
above figure. If the MPC is unchanged and level of autonomous consumption
increases, what occurs?
Line ABC will drop down.
Line EBD rotates and
becomes steeper.
Line ABC shifts up.
Line EBD will shift up.
- When a
nation’s currency suddenly loses value, the ________ may step in to buy
the afflicted currency.
World Bank
United Nations
Federal Reserve Bank
International Monetary
Fund
- A checking
account is
an asset to a commercial
bank.
a liability to a
commercial bank.
an asset for the Federal
Reserve System.
a liability to the
household or firm that has the account.
- A decrease
in aggregate demand will cause
aggregate supply to fall
according to classical economists, and prices to fall according to Keynes.
prices to fall and
unemployment to increase according to both classical economists and Keynes.
aggregate supply to fall
according to Keynes, and unemployment to increase according to classical
economists.
prices to fall according
to classical economists, and unemployment to increase according to Keynes.
- The
classical model uses the assumption that
all wages and prices are
flexible.
monopoly is widespread in
the economy.
interest rates are not
flexible.
economic markets are
fragile and have no tendency to move towards an equilibrium.
- Investment
includes spending on
capital goods, consumer
durable goods, and changes in business inventories.
capital goods, buildings,
and consumer durable goods.
capital goods, buildings,
and changes in business savings.
capital goods, buildings,
and changes in business inventories.
- The
multinational organization that aims to promote world economic growth by
fostering financial stability is the
International Monetary
Fund.
World Trade Organization.
United Nations.
World Bank.
- When the
U.S. dollar appreciates,
foreign residents demand
fewer of U.S. goods, and U.S. residents desire to purchase fewer foreign goods.
foreign residents demand
fewer of U.S. goods, and U.S. residents desire to purchase more foreign goods.
foreign residents demand
more of U.S. goods, and U.S. residents desire to purchase fewer foreign goods.
foreign residents demand
more of U.S. goods, and U.S. residents desire to purchase more foreign goods.
- The
international unit of accounting used by the International Monetary Fund
(IMF) is called
the IMF dollar.
special drawing rights.
the Eurodollar.
the quota subscription.
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